The war's not over

LOS ANGELES (CBS.MW) - President Bush will announce the war is officially over. But is it? Really? Sorry to disappoint you, but the real war is not over. It won't be over for a very long time.

The real war, on terrorism, will continue for another 40 years, according to a retired general, quoted in Fast Company magazine, who spent the last two years directing the U.S. war on global terrorism for the National Security Council.

And once you stop denying this "New Normal," as Fast Company labels it, you can face up to the hard fact that a 40-year war will have a major long-term impact on your investment strategies. I've translated four things that Fast Company's John Ellis said America can do about the war on terrorism into investment strategies for fund investors.

One. Snap out of the denial, diversify more

Talk about denial: "Something like two thirds of the very best people in international finance work in lower Manhattan. That's insane." Get 'em out! The same applies to your portfolio. Rebalance and diversify. Don't put too much of your money in equity funds, or company stocks. Nor in bond funds. Find out what's an optimum strategy for you in this new reality.

And just as Ellis is warning Wall Street to buy real estate outside New York City, fund investors should also be thinking more of diversifying their wealth, into non-paper assets, especially real estate and other hard assets. Investors should also consider getting out of financial securities altogether, possibly taking Robert Kiyosaki's advice in the Rich Dad, Poor Dad series: Become an entrepreneur, and a millionaire next door.

Two. You're at great risk, change your behavior

America may have been a great offensive war machine in Iraq. But our defensive team is in disarray, Ellis says. We're not ready for another catastrophe on U.S. soil, because federal agencies are doing little more than fighting "useless, inane bureaucratic turf wars."

What this means for the mutual fund investor is simple: Your risk level is much higher than you realize. You can no longer trust the government to protect you in this new post-9/11 reality. Don't get me wrong, we'll get back on our feet. But don't be mislead by short-term rallies and overcompensate in the equity market, or get back into chasing hot funds and hot sectors, regardless of Wall Street's hype about a return to the "good new days."

Three. Prepare for the worst-case scenario

We are in a "New Normal" and everything American business thinks it knows about its customers is dated, Ellis says. "Anxiety is the new universal psychographic. Helping customers navigate anxiety" is just "good for the country and plain good business."

But the truth is, America's business leaders don't know what to do: "Everyone in New York is paralyzed. Never have so many decisive people been consumed by so much indecision. It's true at major financial houses." Ouch! The very guys who are supposed to be in charge of our money are acting like frightened deer frozen in the headlights.

Think about what this means for us investors sitting on the sidelines with over $2 trillion in money markets (and as much in bond funds). We have over half of our fund money out of the equity markets. Wall Street and our fund managers just don't get it. These greedy cowards are still focused on keeping their salaries and perks high.

What's the worst-case scenario? Continued rampant selfish greed and myopia in the fund industry means investors must redouble efforts to search for investment alternatives they can trust, because you cannot trust Wall Street and your fund managers.

Four. The need to stay "eternally vigilant"

The denial of a long war on terrorism (and future homeland attacks) is so engrained that the American public prefers and welcomes the diversions of a war in Iraq and now a "war" to revitalize the economy.

Rebuilding Iraq and the American economy are as much psychological diversions from the lurking terrorist threats as they are real necessities. But they do keep us in denial about the real dangers, such as the absolutely certainty of another eventual terrorist attack on American soil. Ellis says our business and financial leaders must not only help us prepare, they must warn us that this is indeed our new long-term reality!

So how can an investor approach this "New Normal?" Get used to it with a positive mental attitude plus a healthy paranoia. You can no longer trust what you hear in the media and press from the government, Wall Street, your fund managers, advisers, or the business world. They may be putting up a great front, but they're in denial and really don't have a clue about investing during a 40-year war on terrorism.

However, you cannot afford to stay in denial -- not if you're going to retire anytime before 2043. Trust no one but yourself. Get aggressive and take change of your financial life. Rebalance and diversify. Look for non-paper assets. Consider going into business for yourself. And don't be misled by short-term rallies.

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